Correlation Between Stepstone and Western Acquisition

Can any of the company-specific risk be diversified away by investing in both Stepstone and Western Acquisition at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Stepstone and Western Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stepstone Group and Western Acquisition Ventures, you can compare the effects of market volatilities on Stepstone and Western Acquisition and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Stepstone with a short position of Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Western Acquisition.

Diversification Opportunities for Stepstone and Western Acquisition

0.11

Correlation Coefficient

Stepstone  Western Acquisition

Average diversification

The 3 months correlation between Stepstone and Western is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition and Stepstone is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Stepstone Group are associated (or correlated) with Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Stepstone i.e., Stepstone and Western Acquisition go up and down completely randomly.

Pair Corralation between Stepstone and Western Acquisition

Given the investment horizon of 90 days Stepstone Group is expected to under-perform the Western Acquisition. In addition to that, Stepstone is 3.66 times more volatile than Western Acquisition Ventures. It trades about -0.14 of its total potential returns per unit of risk. Western Acquisition Ventures is currently generating about -0.02 per unit of volatility. If you would invest  1,092  in Western Acquisition Ventures on October 1, 2024 and sell it today you would lose (3.00) from holding Western Acquisition Ventures or give up 0.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Stepstone Group  vs.  Western Acquisition Ventures

Stepstone Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Western Acquisition

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Stepstone and Western Acquisition

The main advantage of trading using opposite Stepstone and Western Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone position performs unexpectedly, Western Acquisition can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Acquisition will offset losses from the drop in Western Acquisition's long position.

The idea behind Stepstone Group and Western Acquisition Ventures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.